Heavy weights drag markets

Mon, 18 Oct 01:30 pm

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Indian indices continue to languish in the red on sell off in heavyweights during the previous two hours of trade. Stocks from IT and oil & gas space are trading firm while stocks from the FMCG and realty space are trading weak.

The BSE-Sensex is down by 167 points while NSE-Nifty is trading 53 points below the dotted line. BSE-Midcap is down by 1.1% while BSE-Smallcap index is trading 0.6% below Friday’s closing. The rupee is trading at 44.26 to the US dollar.

Stocks of capital goods companies are trading weak led by Crompton Greaves, Areva T&D and Kalpataru Power. Engineering and construction major L&T announced its results for the quarter ended September 2010 a while back. The company has reported a topline and profit growth of 18% YoY and 32% YoY respectively. The growth in revenues was led by the company’s E&C division, which saw a growth of 18% YoY during the quarter. This segment forms nearly 85% of the company’s gross revenues. The company’s operating margins expanded by 0.1% YoY to 10.1%. The profit growth was higher during the quarter led by a 70% YoY surge in other income as well as an extraordinary income of about Rs 708 m. On excluding this onetime extraordinary gain, profits are higher by 26% YoY. L&T’s cumulative increase of order inflow stood at 29% YoY during the first half of the current fiscal year. At the end of the quarter, the company’s order book stood at about Rs 1.2 trillion.

Energy companies are trading mixed with Petronet LNG and IOC trading firm while Gujarat gas and Castrol are trading weak. As per a leading financial daily, India will launch its first ever offer for shale gas areas of exploration by the end of 2011. At present, the Oil Ministry is evolving a policy framework for shale gas. While several basins in India are known to hold shale gas resources, the primary focus for exploration will be on three basins. These are Cambay (in Gujarat), Assam-Arakan (in the North-East) and Gondwana (in central India). As part of knowledge sharing on shale gas exploration, India is likely to sign a cooperation agreement with the US Geological Survey during President Barack Obama's visit next month. It may be noted that shale gas, is a gas obtained from sedimentary rocks. This is a new focus area in the US, Canada and China as an alternative to conventional oil and gas. In fact, these unconventional deposits have raised estimates for US gas reserves from 30 years to 100 years at current usage rates. Shale gas deposits were not considered economically feasible for tapping. However, Houston billionaire George P. Mitchell pioneered new extraction techniques in the 1990s which makes it possible to extract this gas much more cost effectively than before.